Due Diligence Best Practices

Blog post Chad Whitney 2018-02-23

If your job is to conduct due diligence - whether into a real-estate property, an investment fund, or a borrower - then you are well aware of the manual steps that can bog down the process. Long MS Word and Excel questionnaires can be redundant and difficult to manage. Using blank questionnaires with no intelligence require recipients to fill out the same spaces with the same information over and over. Tracking and monitoring the status of multiple requests over email is overwhelming. The list of frustrations goes on and on.

The good news is that manual due diligence is no longer the only option. Advancements in cloud storage, software-as-a-service, and predictive analytics make this the perfect time for a due diligence automation solution. Here are five due diligence process best practices based on our experience with a myriad of customers.

Best Practice #1: Digitize your Due Diligence Process

There’s no room for paper a due diligence process anymore. Aside from the waste factor, a paper questionnaire cannot be accessed from anywhere and its data can only be factored into analytics if it’s manually entered into a computer. Plus, paper is the antithesis of a modern due diligence process. CENTRL allows users to upload paper-based questionnaires thus bridging the gap between paper and software.

Best Practices #2: Treat your 3rd party as a partner not an adversary.

Provide questionnaire recipients with the same software as you allowing them to respond directly into your diligence software’s process. Only a shared system gives recipients the ability to assign questions internally, collaborate, and have approval workflows and audit trails.

Best Practices #3: A standardized evaluation process

There are three key benefits to a high-quality standardized evaluation process in due diligence process software. First, it anticipates the needs of your firm; you can assign specific answers or questions to domain experts within your company. Second, you can create a standard grading scale, which enforces standardization. And third, for objective Yes/No and multiple-choice answers, you can automate the scoring removing the possibility of human error.

Best Practices #4: Eliminate the need for email

Keep clarifications, issue resolution and other communication contained within the application. One of the most annoying parts of conducting two-party due diligence processes across email is the uncontrolled flow of back-and-forth information without specific context. Using CENTRL solutions, all communication is captured allowing you to resurrect conversations by topic. In other words, there will be a complete communication trail attached to questionnaire questions, sections or other content.

Best Practices #5: Monitoring, reporting and analysis is vital

You need a way to monitor your 3rd party’s progress, create a variety of reports and deliver an analysis which is both thorough and accurate.

Click to learn more about CENTRL’s due diligence process software.

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